Recent months have shown a growing divergence between the high and low ends of the U.S. market. Prices in the bottom third jumped about 9% in June from a year earlier, compared with 1.1% growth for the top third, data from Redfin show. Meanwhile, sales for lower-priced homes plunged almost 20% as buyers struggled to find properties in their range, according to Zillow. Carpenters work on the frame of a new home under construction in Las Vegas.(AP Photo/Julie Jacobson)

Despite signs that home prices may be stabilizing, California still faces a severe housing crisis. Throughout the United States, 55 percent of households can afford to buy a median-priced home. In California, that number has fallen to 30 percent. High prices have taken their toll on the rental market also, which is fueling mistaken calls for statewide rent control – a policy that will further distort the market and reduce housing supply over time.

We don’t ever seek government solutions to market problems, but this problem has been caused by government land-use controls and regulations. It’s a simple supply and demand issue – and one that has been a long time in the making. “Between 1970 and 1980, California home prices went from 30 percent above U.S. levels to more than 80 percent higher. This trend has continued,” according to a 2015 report from the nonpartisan Legislative Analyst’s Office.

The LAO pinpointed the problem: “community resistance to housing, environmental policies, lack of fiscal incentives for local governments to approve housing, and limited land constrains new housing construction.” That’s particularly true in coastal regions. High prices there have also been driving up costs in inland communities as people from the big metro areas seek affordable housing.

Yet California lawmakers have made little progress. Actually, that description is overly generous. A recent report from the Public Policy Institute of California concluded that “the statewide numbers (of new housing units) are moving in the wrong direction.” Residential permits dropped 38 percent over the past year. Permits have fallen for multi-family housing, also.

The state has approached housing shortages the way that it has approached many issues – by doing little to address the root causes. As PPIC noted, the state budget includes $1.75 billion for housing subsidies. But there’s no way to address this through government spending. A high-profile but flawed bill (Senate Bill 50) to force localities to permit high-density housing near job centers and along transit routes failed amid complaints from locals.

The major remaining housing bill, Senate Bill 330, is more limited. California cities and counties “have exacerbated the housing shortage by creating barriers to new construction,” according to the California Chamber of Commerce’s support statement. The group said the measure “would streamline the development of more housing in California by amending local land-use approval processes.”

That’s a reasonable approach, although it’s opposed by groups of local governments concerned about its limits on project-specific fees and undermining of local control. Its passage is far from certain, however. The state should also examine its tax system, which encourages cities to permit retail development and discourages permits for housing developments. Incentives matter. Any tax changes, however, must be done in a revenue-neutral manner.

Although little progress has been made toward boosting housing supply, we are heartened that more lawmakers from both parties acknowledge the role that government rules have played in depressing supply. But the data is disheartening. PPIC notes that California needs 180,000 homes each year to bring the market into balance, but that annual permits are at 93,000.

Subsidies and rent controls aren’t going to address that imbalance. State and local governments need to make it easier for builders to keep up with demand. It’s time for Sacramento lawmakers to give this issue the attention it deserves.

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